Rahul Bhatnagar, Member- Technical
1. An application bearing IA 140/ND/2023 was moved by the Applicant Company for rectify certain typographical errors crept into the order dated 31.11.2022. Upon hearing the submissions made by the counsel and also on a reading of the contents of the application and prayers made therein, this Adjudicating Authority vide order dated 22.05.2022 has passed the following order: -
“Heard the submissions made by Ld. Counsel for the Applicant. Ld. Counsel for the Applicant pointed out the typographical error occurred in the order dated 31.11.2022. Ld. Counsel is directed to deposit the original order of this Tribunal to make necessary typographical corrections in the order. The present application is allowed. The modified order will be issued on receipt of earlier order. List the matter on 06.06.2023”.
In the light of the above, the following order is made to meet the ends of justice & fair play and also to ensure that the applicant/petitioner will not face any hurdles in implementation of the scheme as approved by this Adjudicating Authority.
2. This Petition is preferred by the Transferee Company under Section 230 to 232 of Companies Act, 2013 read with the Companies (Compromise, Arrangements and Amalgamations) Rules, 2016 for the purpose of the approval of the Scheme of Amalgamation (hereinafter referred to as ‘Scheme’ for brevity), as contemplated between the Companies, its Shareholders and Creditors. The copy of the Scheme has been placed on record. The Appointed date as fixed for the Proposed Scheme of Amalgamation is 30.12.2018. The details of the Companies proposed to be amalgamated, as placed on record, are given in the following paragraphs.
3. Electronic Tender Private Limited, (hereinafter referred to as “Transferor Company-1”) was incorporated on the 15.03.2000 under the provisions of the erstwhile Companies Act, (No. 57 of 1984) of the Republic of Mauritius (replaced by the Companies Act 2001) as a private company having its registered office at Level 3, GFin Tower, 42, Hotel Street, Cybercity, Ebene 72201, Mauritius. The Equity Share Capital is USD 772 divided into 7,723,317 ordinary shares of USD 0.0001 each which is fully paid up.
4. ElectronicTender.Com (India) Private Limited, (hereinafter referred to as Applicant/“Transferee Company”) was incorporated on the 28.03.2000 under the provisions of the erstwhile Companies Act, 1956 as a private limited company having its registered office at 6, Jn Mandir Road New Delhi-110001. The Equity Share Capital of Rs. 100,00,000 consisting 100,00,000 Equity Shares of Rs. 1 each. Issued, Subscribed and Paid-up Capital 104200 equity shares of Rs.1 each amounting to Rs. 1,04,200/-.
5. The present Petition has been filed by the Transferee Company. Since the Registered office of the Transferee Company is situated in Delhi, the jurisdiction lies with this Bench.
6. From the records, it is seen that the First Motion petition was filed by the Applicant Company for seeking directions for dispensing with the meeting of Equity Shareholders, Secured Creditors and Unsecured Creditors of the Applicant Company. This Tribunal, in the First Motion Application bearing No. CA (CAA) No. 165(ND) 2019, vide Order dated 22.01.2020 dispensed with the requirement of convening the meetings of the equity shareholders, secured creditors and unsecured creditors of Transferee Company.
7. Subsequent to the order of dispensation of meetings in relation to the Transferee Company, the Second Motion petition was moved by the Applicant Company in connection with the Scheme of Amalgamation for issuance of notices to the Central Government, Registrar of Companies NCT of Delhi & Haryana, Regional Director (Northern Region) MCA, Income Tax Authorities, Official Liquidator, Reserve Bank of India other sectorial regulators who will be affected by the proposed Scheme and to such other Objector(s), if any, and also for publication of notice in respect of the said Scheme. The said petition was admitted and directions were issued, vide Order dated 18.03.2020 of this Tribunal, requiring the Applicant Companies to serve notices to the Central Government, Registrar of Companies NCT of Delhi & Haryana, Regional Director (Northern Region) MCA, Income Tax Authorities, Official Liquidator and other sectoral regulators likely to be affected by the said proposed Scheme and also to carry out necessary publication in English and Hindi newspapers with respect to the said Scheme.
8. It is submitted by the Petitioners that in compliance of the above stated directions, the Petitioners duly filed an Affidavit of Service by confirming that the aforesaid Notices of the present Company Petition were published on 06.05.2020 in Business Standard (English) and (Hindi) newspapers Delhi edition. It is further submitted that the Petitioner Companies also served the Notices of the present Company Petition to all the statutory authorities.
9. It is submitted by the Applicant Company that the compliance with respect to accounting treatment has been made as certified by the Independent Auditor’s Certificate dated 17.10.2019, certifying that the proposed accounting treatment included in the Scheme of Amalgamation of the petitioner companies is in compliance with the applicable Accounting Standards specified under the Section 133 of the Act.
10. The Income Tax Department vide their Ld. Counsel made oral submission before the bench of this Tribunal via virtual hearing held on 07.08.2020 stated therein that they have no objection with respect to the present Scheme of arrangement herein subject to protection of statutory rights as per the Supreme Court Judgement in Vodafone V. Department of Income Tax.
11. The Regional Director vide his report dated 03.09.2020 has not objected to the proposed scheme but has made certain observations. The petitioner companies had filed reply dated 26.08.2020 in response to the observations made by the Regional Director, wherein the petitioner companies gave undertaking to appropriately comply with the observations made by the Regional Director. The details are given below:
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Observations, of the Regional Director |
Reply of the Petitioner Companies |
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As per petition and annexures thereto, the Hon’ble Supreme Court of Mauritius has given its approval for this amalgamation vide Case No. SC/COM/MOT/00122/2019 DATED 28.03.2019, however, the board of directors of the transferee company has approved the proposed Scheme of Amalgamation in their meeting held on 01.10.2019. Moreover, the valuation report for the proposed swap ratio dates is 14.10.2019. Therefore, it is not understood as to how the swap ratio which was prepared on the succeeding date can be approve ahead of its preparation in terms of the provisions of Section 232(2) (c) of the Companies Act, 2013 offer your comments with justification and documentary proof thereof along with and the order of the Supreme Court of Mauritius. |
The
Board of Directors of the Transferee Company approved the
draft scheme of amalgamation in May 11, 2018. Copy of the certified
true copy of the extract of the Minutes is enclosed herewith and
marked as Annexure-A. Accordingly, the swap ratio of shareholdings
including SOP of the transferor company being an inward overseas merger
in India, was computed by the Auditors of the Transferee
Company and the proposed Scheme of merger was conveyed to
the transferor company in Mauritius. Accordingly after the order of
the Supreme Court of Mauritius, the board of Directors of the
Transferee Company in the board meeting held on 1st Oct,
2019 acted according to the earlier decision of 11th May,
2018 of the board, as well as, the decision of the Supreme Court of
Mauritius. |
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In 2011-12, the Transferee Company has allotted 420 equity shares of Rs. 10/- each to AKM Systems Private Limited at a premium price of Rs. 47,550/- per share. The share premium amounted to a total of Rs. 1,99,71,000/- Please enclose the Share Valuation Report prepared by a registered valuer since the shares are issued at exorbitant price The Transferor Company is a non- applicant foreign entity registered in Mauritius. Post- allotment financial statements of the Transferee Company show continuous increase in outstanding receivables from such foreign entity. The accumulated overdue receivables from the said entity as 31.03.2019 is Rs. 190,74,904/- and simultaneously debit entry of the Bad debts account by the amount (Rs 1,94,77,039/-) being written off. Please state the feasibility of the Scheme since the present petition is silent about it. |
The valuation report which was taken from a Merchant Banker and the same was also enclosed for their reference. As
per the agreement between the Transferor and the Transferee |
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In Para 2 of Notes to the Accounts to the financial statement as at 31.03.2019, the company has also disclosed that consequent to the order of the Hon'ble High Court of Delhi dated 30.05.2019 and termination of agreement with one of the parties, the amount outstanding payables as per order has been retained as receivables and balance amount has been written as the party concerned has not furnished any detail as envisaged in the order as on date of the audit nor reconciled the actual out standings. Please offer a brief note upon this transaction with documentary proof/order of High Court in support of the transaction. |
The Company had a licensing agreement (called ASP License Agreement) with M/s Telecommunications Consultants India Lid (TCIL a Govt. of India PSU, wherein TCIL was supposed to pay the Transferee Company, i.e., ElectronicTendor.com (India) Pvt. Ltd. ( i.e. ETI) certain amount as per the licensing agreement between ETI and TCIL receipt of corresponding payments by TCIL from the end- users/ clients. The Hon'ble High Court directed TCIL to correct various transgressions including those relating to payments to ETI. One of the transgressions of TCIL was that TCIL had not been informing ETI properly of its stream of receipts (with details), nor was it properly remitting the dues to ETI in a timely manner. Later, with reference to para 5 of the Delhi High Court order, even after the Court order time of finalization of the statements of accounts of ETI for the FY 2018-2019, huge outstanding amount and details were informed to be still due from TCIL. for which no information was forthcoming from TCIL. Hence, ETI, the Transferee Company decided to write-off in its books of accounts the outstanding amount for which no information was being provided by TCIL, and also simultaneously exercise the legal option for the recovery of the amounts due, irrespective of the write-off. |
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State
the names of common directors/shareholders in the said
foreign entity and Transferee Company with date of
acquisition of |
List of the Common directors and shareholders was enclosed for the reference. |
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The
financial statements filed by the Transferee Company on MCA21
Registry from time to time reported its main source of revenue
from providing development service to the said foreign entity. Please furnish
the details of transaction taken place |
As
explained in the Background, the Transferee Company has to recover the
developmental cost of software incurred by it from the Transferor
Company, and hence it is shown as recoverable apart from
sundry expenditure incurred on behalf of the |
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the Transferee Company during the last 8 (eight) years with ledger copies of transactions. |
share
from the marketing/ licensing of the software is also credited to
Transferor Company as explained earlier in reply. The primary source
of revenue is usage and licence charges from the customers and end-
users, and not amounts of cost recoverable from the
Transferor Company which is only a cost recovery as
explained in the background. In the Form AOC4 filed with
ROC in 2019, under "Description of the
product or service, it is stated-"Design and development
services of software applications including customized |
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The RBI Copy of Approval was sought received from |
The
same was annexed in the reply. Further the Applicant Company has
placed on record Affidavit of Compliance of Foreign
Exchange Management Act, 1999 by Statutory Auditor and Managing
Director as required for deemed approval by RBI in terms of Regulation
9 of Foreign Exchange Management (Cross Border |
12. In view of the foregoing facts and discussion and upon considering the approval accorded by the Members and Creditors of both the Companies to the proposed Scheme and also in the view of the fact that no sustainable objections have been raised by the Office of the Regional Director, Income Tax Department or any other interested party, there does not appear to be any impediment in granting sanction to the Scheme proposed of amalgamation.
13. Accordingly, as a sequel to the above facts and circumstances, sanction is hereby granted to the Scheme of Amalgamation proposed by the Applicant Company under Section 230 to 232 of the Companies Act, 2013.
14. The sanctioned Scheme of Amalgamation shall be binding on the Transferor Company and Transferee Company and their Shareholders and Creditors. The Petitioner Companies shall remain bound to comply with the statutory requirements in accordance with law.
15. Notwithstanding the above, if at any stage any deficiency is found or violation committed qua any enactment, statutory rule or regulation is found to be committed, the sanction granted by this Tribunal to the Scheme will not come in the way of action to be taken, albeit, in accordance with law, against the concerned persons, Directors and Officials of the Applicant Company.
16. While approving the Scheme as above, it is clarified that this Order should not be construed as an order in any way granting exemption from payment of Stamp Duty, Taxes or other statutory dues, if any, and payment in accordance with law or in respect to any permission/compliance with any other requirement, which may be specifically required under any law will be made. Further the approval of the Scheme would in no manner affect the tax treatment of the transactions under the Income Tax Act, 1961 or serve as any exemption or defense for the Applicant Company against tax treatment in accordance with the provisions of Income Tax Act, 1961.
17. This tribunal further directs with respect to Transferor companies and Transferee company, that:
(i) All benefits, entitlements, incentives and concessions under incentive schemes and policies that the Transferor Company is entitled to including under Customs, Excise, Service Tax, VAT, Sales Tax, GST and Entry Tax and Income Tax laws, subsidy receivables from Government, grant from any governmental authorities, direct tax benefit/exemptions/deductions, shall, to the extent statutorily available and along with associated obligations, stand transferred to and be available to the Transferee Company as if the Transferee Company was originally entitled to all such benefits, entitlements, incentives and concessions;
(ii) All contracts of the Transferor Company, which are subsisting or having effect immediately before the Effective Date, shall stand transferred to and vested in the Transferee Company and be in full force and effect in favor of the Transferee Company and may be enforced by or against it as fully and effectually as if, instead of the Transferor Company, the Transferee Company had been a party or beneficiary or obliged thereto;
(iii) All the employees of the Transferor Company shall be deemed to have become the employees and the staff of the Transferee Company with effect from the Appointed Date, and shall stand transferred to the Transferee Company without any interruption of service and on the terms and conditions no less favorable than those on which they are engaged by the Transferor Company, as on the Effective Date, including in relation to the level of remuneration and contractual and statutory benefits, incentive plans, terminal benefits, gratuity plans, provident plans and any other retirement benefits;
(iv) All liabilities of the Transferor Company, shall, pursuant to the provisions of section 232(4) and other applicable provisions of the Companies Act, 2013, to the extent they are outstanding as on the Appointed Date, without any further act, instrument or deed stand transferred to and be deemed to be the debts, liabilities, contingent liabilities, duties and obligations etc. as the case may be, of the Transferee Company and shall be exercised by or against the Transferee Company, as if it had incurred such liabilities.
(v) All proceedings now pending by or against the Transferor Company be continued by or against the Transferee Company.
(vi) Any person interested or effected shall be at liberty to apply to this Tribunal in the above matter for any directions that may be necessary.
17. Further, the Applicant Company shall within thirty days of the date of the receipt of this Order, cause a Certified Copy of this Order to be delivered to the Registrar of Companies for registration. The Transferor Company has already been dissolved by the Registrar of Companies, Mauritius.
18. In compliance with the requirement of Section 230(1) of the Act, the transferee company shall until the full implementation of the Scheme of Amalgamation filed stated in the Form CAA 8 along with the requirement fee as prescribed in the Companies (Registration offices and fees) Rules 2014 within 210 days from the end of each financial year.
The Company Petition bearing (CAA) 33 (ND)/2020 is allowed on the above terms. This order supersedes earlier order dated 31.11.2022, where the typographical errors have been noticed which are now stands rectified by this order.
